Co-financing Session:

Recorded by Sana F. K. JATTA and Ayurzana Puntsagdavaa

The lunch session on co-financing was held on 4 March 2009 with the following purposes:

  • to reflect on experiences of project and programme managers of IFAD-assisted projects in the Asia and the Pacific region on co-financing and;
  • to extract lessons learnt to help improve partnership frameworks in the future.
There were 30 participants in the session including the project managers and country presence officers from Bangladesh, Cambodia, India, Indonesia, Laos, Philippines, Sri Lanka, and VietNam. In addition, there were ten IFAD staff, plus representatives from partners such as WFP, UNDP and SEARCA.

To set the scene for discussion the following facts were shared with the participants. Out of IFAD-assisted 52 projects in 2008, 27 projects were co-financed (23 were IFAD-initiated and co-financed by others; 4 were other institution-initiated and co-financed by IFAD). IFAD's corporate target for co-financing is to achieve a ratio of 1:1, of which 30% should be IFAD co-financing other donor funded projects, leaving 70% of IFAD projects having to seek to mobilize co-financing from others.

During the animated discussion the following key points were raised by project directors / managers:
  • Co-financing promised during design sometimes did not materialize;
  • Even where co-financing promised during design did end up materializing, they sometimes were on terms and conditions different from those agreed;
  • Lack of synchronization of resources mobilized by co-financiers;
  • Complexity of resource mobilisation, especially when many co-financiers fund 1 specific activity or component;
  • Managing different co-financiers demands a lot of time from project directors / managers;
  • Donors demand co-financing sometimes for their own internal corporate requirements rather than that of borrowing governments;
  • Sometimes mobilization of Government counterpart funds pose such a hassle for project directors that they are forced to use donor’s funds, which subsequently creates accountability problems and problems with withdrawal applications; and
  • Lack of harmonization of strategic objectives and operational procedures of donors poses difficulties during implementation.

Some of the key recommendations that emerged from the discussions were the following:
  • Co-financing agreements should be completed, finalized and well documented prior to submission to the Executive Board of IFAD;
  • Programme design should build in sufficient flexibility such that lack of co-financing resources during implementation will not have a major impact on the whole project;
  • Avoid many co-financiers funding the same component where possible;
  • Different cofinanciers should be assigned different geographic area or component or activity to fund such that each could be self contained;
  • Target co-financing of different programme activities based on comparative advantages of individual co-financiers with the hope of managing or capitalizing on knowledge they have and on their corporate comfort levels;
  • Carefully selecting cofinanciers can be very useful e.g. in debt-swaps; and
  • When mobilizing co-financing ensure that co-financiers explain clearly their procedures for mobilizing their funds to ensure project managers know exactly what they have to do from the beginning of the project.